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Penalties for incorrectly treating employees as contractors

Business owners need to be aware of the difference between an employee and a contractor so that they are able to meet their tax requirements.

It is illegal for businesses to incorrectly treat their employees as contractors. This is because it allows businesses to unlawfully reduce their labour costs and gain an unfair advantage over their competition.

In general, an employee:

-performs work under the direction and control of their employer

-bears no financial risk

-entitled to have superannuation contributions paid into a nominated fund by their employer

-has income tax deducted by their employer

A contractor:

-has a high level of control on how and when they complete work

-bears responsibility and liability of poor work

-pays their own superannuation

-pays their own tax and GST to the ATO

Businesses need to be aware that incorrectly treating an employee as a contractor can result in financial penalties and charges, such as the PAYG withholding penalty and superannuation guarantee penalty.

The ATO is using a combination of education and compliance action to ensure that all businesses are on a level playing field.

Posted on 10 January '14 by , under Tax.

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The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

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Check employer contributions
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Gather the relevant information
When consolidating your super, you will need to have the following details ready:

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